TRAI issues consultation paper on DTH licence renewal

MUMBAI: The Telecom Regulatory Authority of India (TRAI) has issued a consultation paper on the issue of extension of licence of Direct-to-Home (DTH) operators. The key issues discussed in the consultation paper pertain to the licence fee, bank guarantee, and period of licence.

The Ministry of Information and Broadcasting (MIB) had sent a reference to the TRAI on September 3, seeking its recommendations on certain terms and conditions for extension of the period of DTH licences.

Stakeholders can offer their comments by 15 October.

The MIB has sought TRAI’ recommendations on the following issues:

Whether the entry fee of Rs 100 million is required to be paid again by the DTH company for the extension of the validity period of the DTH licence? If not, then whether no entry fee is required or a modified entry fee is required to be levied. In case of requirement of modified entry fee, what should be the amount of entry fee?

Whether the period of extension of validity of DTH licence should be for another period of 10 years?

Whether the bank guarantee of Rs 400 million is to be renewed for the entire period of the licence again on extension of validity period of licence?

The ministry had also sought TRAI’s recommendations on an interim arrangement with Dish TV, whose DTH licence expired on 30 September. Dish TV is India’s first DTH operator having started its operations in 2004.

Since the time left before the due date of expiry of the licence period for the first licencee (Dish TV) was simply not sufficient for TRAI to follow the due consultation process, the TRAI suggested that, in the interim, MIB may consider allowing the said DTH licencee to continue its operations/services on the existing terms and conditions.

However, Dish TV will have to renew the existing bank guarantee. Additionally, the Dish TV also has to take an undertaking that once the final policy in this regard is laid down by the Government it will comply with that policy for the interim period also. Any financial obligations arising from the change in policy will also have to be honoured.

Presently, there are six pay DTH operators in the country. ASC Enterprises (now Dish TV India) was the first DTH licencee which got the Wireless Operating Licence (WOL) for starting its DTH services on 1 October 2003.

The other five DTH operators got the WOLs during 2006 to 2008. The first DTH licence was due to expire on 30th September 2013.

The DTH Guidelines are silent on the course of action to be adopted after expiry of the 10 year licence period however the authority added that while the guidelines may be silent on the provision of an extension or a renewal, it is not the intent of the policy to disallow existing licence holders from continuing their business beyond the initial licence period of 10 years.

It would, therefore, be a reasonable expectation on the part of DTH licencees that, on the expiry of the initial 10 year licence, they would be eligible to apply for issue of a new licence so that they could continue their business, TRAI stated.

The authority also stated that certain modifications have to be carried out in the DTH Guidelines and the licence agreement to reflect the policy changes that have taken place since 2001 prominent among them being the fact that the broadcasting sector coming under the purview of TRAI/TDSAT in 2004.

Accordingly, the references to regulator, arbitrator etc. would have to be suitably modified. The issue of the annual licence fee is presently sub-judice. Any judicial pronouncements in this regard have to be appropriately reflected, the authority asserted.

Entry fee

On the issue of entry fee, the authority said that in case an entry fee is to be levied, its quantum also needs to be determined. One way for determining the quantum of the entry fee could be to link it with the duration of the licence viz. the period of validity of the licence, it added further.

Another view could be that, if the entry fee levied at the time of granting the DTH licence was solely to judge the seriousness of the entities seeking the DTH licence and to cover the cost of inducting of a service provider, then at the time of issue of a new licence to an existing licencee, the entry fee ought not to be levied as the DTH operator had already proved its bonafides in the sector and the cost of inducting a service provider is not a recurring cost to the licensor, the authority stated further.

As per the data provided by the DTH operators, the two leading DTH operators, who are in the DTH business for over 7 years, have paid an annual licence fee of Rs 1.12 billion and Rs 1.21 billion for the year 2012-2013, and, till date, they have paid Rs 3.54 billion and Rs 3.72 billion as licence fee to the government.

Since the entry fee of Rs 100 million paid by an existing DTH operator is quite small as compared to its recurrent payment in the form of annual licence fees paid during the licence period of 10 year licence period, there could be a view that existing DTH operators may not be asked to pay the entry fee again at the time of issue of a new licence; however, for the sake of parity, entry fee should continue to be levied on new players who seek licences for the first time, the authority clarified.

DTH operators have, time and again, argued that it is important to maintain a level-playing field between providers of similar or substitutable services, especially services provided by MSOs through DAS. In this context, DTH operators have pointed out that various levies imposed by the Government, on DTH operators are not levied on the operators of DAS.

Period of new licence to the existing DTH licencee

The authority said that the period of DTH licence should not be so short that it creates uncertainty in the operators’ business model and inhibits futuristic business planning. In the same breadth it added that having a too long a licence period may not be the right approach from a policy perspective. While stating that the licence period should not be too long the authority said that the two viewpoints have to be judiciously balanced while looking at the licence period of new licences to be issued to existing DTH licencees.

Currently, the DTH Guidelines do not have an explicit provision for extension/renewal. A similar situation should not arise when the new licences expire. So, it would be appropriate to incorporate, in the DTH Guidelines, a provision that indicates the period of extension/renewal and the procedure to be followed in future for the extension/renewal of the DTH licences on their expiry, the authority said.

The licensor should have the flexibility to modify the terms and conditions for extension/renewal of the licence.

Period of bank guarantee

The bank guarantee, TRAI said, is a safeguard against non-payment of licence fee and violation of licence conditions by the licencee. This is why the quantum of the bank guarantee gets linked to the amount of licence fee to be paid by the licencee.

As per the present licence agreement, licence fee is paid annually after the end of the financial year. In this setting, the quantum of the bank guarantee ought to be equal to the licence fee paid by the operator during the previous financial year.

As per the DTH Guidelines, the licensee will have to give a Bank Guarantee of Rs 400 million to MIB within one month of issual of SACFA clearance by W.P.C. from any Scheduled Bank in Form-C for an amount valid for the duration of the license.

Accordingly, as regards the validity of the bank guarantee, one logical view could be that the bank guarantee should be renewed and should have the validity which covers the entire period of the new licence issued to the existing DTH licencees, the authority held.